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Weekly Commentary 9 August 2010 Now you see it, now you don’t Once again the

Weekly

Commentary

9 August 2010

Now you see it, now you don’t

Once again the Household Labour Force Survey defied prediction, with the unemployment rate bouncing to 6.8% in the June quarter.

The measured unemployment rate has been astoundingly volatile lately. In the last year it has gone from 6.5% to what was first reported as 7.3% (since revised to 7.1%), down to 6.0%, then up to 6.8%. This variability has been frustrating when it comes to telling a story of how the recovery is tracking, but for that reason we didn’t completely buy in to the sharp improvement to 6.0% in Q1. Last week’s release confirms that the previous reading was a false signal.

Looking through the volatility may be the best way to interpret the data. The notion that unemployment has dropped gradually after peaking at the end of last year fits better with our understanding of the broader economy, and our a priori forecasts. It also fits better with other evidence such as the Quarterly Employment Survey, surveyed hiring intentions, surveyed difficulty finding labour, job advertisements and benefit payments, all of which have shown steady improvement over the past 6-9 months.

If the survey is to be taken literally, there have been huge and unprecedented changes in the labour market status of 20- 24 year-old males. In the March quarter, an unusually low number of these young men were unemployed, only to re-enter

the ranks of the unemployed this quarter. This caused relatively modest changes in the raw number of unemployed people – down 5,000 in March and up 2,000 in June. But those modest changes were the opposite of the normal seasonal pattern. So applying a seasonal adjustment exaggerated the movements manyfold.

in the activity indicators. Total hours paid were up 1.2%, building on last quarter’s 1.1% growth, while FTE employment rose by 0.5%. These series don’t closely follow their equivalents in the household survey from one quarter to the next, but at least in recent times the QES has appeared to be the more stable of the two surveys.

Employment fell by 0.3%, taking the gloss off last quarter’s 1% increase. However, there were a few saving graces in the details. The fall in total employment was entirely due to part-time jobs; full-time employment actually rose 0.2%, on top of a 1.4% increase in Q1. Along similar lines, the economy-wide number of hours worked was up 0.6%, which is broadly consistent with our forecast of 0.7% GDP growth over the quarter.

So while there are good reasons to cast a wary eye at the volatility of the official unemployment measure, the overall message seems to be one of gradual improvement in the labour market. Any concerns that the RBNZ may have had about a tighter labour market provoking early wage rises and higher inflation will have evaporated after last week’s releases.

The other event of note last week was Fonterra’s monthly auction. Milk powder

There was also a more encouraging message from the two employer surveys earlier in the week. The Labour Cost Index, the cleanest measure of trends in wages, advanced 0.4% in Q2, a slight improvement over last quarter’s 0.3%. Private sector wages were up 0.5%, while public sector wage growth had its weakest showing since 1999, with just 0.2% growth over the quarter. The muted wage growth to date is an echo of last year’s recession, rather than a sign of things to come.

The Quarterly Employment Survey also indicated modest wage growth, but the more interesting detail was

NZ Interest Rates

5.4 5.4 5.2 5.2 5.0 5.0 4.8 4.8 4.6 4.6 4.4 4.4 % % 4.2
5.4
5.4
5.2
5.2
5.0
5.0
4.8
4.8
4.6
4.6
4.4
4.4
%
%
4.2
4.2
4.0
4.0
2-Aug-10
3.8
3.8
9-Aug-10
3.6
3.6
3.4
3.4
3.2
3.2
90
180
1yr
2yr
3yr
4yr
5yr
7yr
10yr
Days
Days
swap
swap
swap
swap
swap
swap
swap

*Yield curve is yields on bank bills to 180 days, fixed interest rate swaps for 1year onwards.

prices fell 8.3%, making it a total drop of 24% from their peak in the

prices fell 8.3%, making it a total drop of 24% from their peak in the last four months. Fonterra’s initial payout forecast for this season was $6.90-7.10/kg; our estimates suggest that this is still achievable if world prices and the NZ dollar hold around current levels. But of course that’s a big if, and Fonterra may decide to take a conservative approach and prepare farmers for the possibility of something less.

One point to bear in mind is that we estimate that NZ dairy production could up as much as 8% on the previous drought-afflicted season. That will mean a lot more product hitting the international market, and we can’t be sure how much impact that will have on world prices.

To date, our forecast track for the OCR

ROUND-UP/KEY DATA PREVIEWS

has been consistent with 25 basis point hikes at every review until early 2012, although we’ve suggested treating this as a risk-weighted forecast, with as much risk of larger hikes as of pauses depending on how the data pans out. It’s clear that for now the risks are being realised more on the downside, so we have adopted a slightly more modest tightening profile, with a pause in the near future to assess the landscape – pencilled in for December and January.

Having said that, we still expect further OCR hikes in September and October, and the September Monetary Policy Statement will continue to outline a plan for returning the OCR to more normal levels. The RBNZ has been at pains to emphasise that the current level of the OCR is “very supportive of economic activity”, and

has consistently articulated a plan for a gradual normalisation. Recent data won’t be enough to completely derail such a well-developed plan at this early stage.

Fixed vs. floating: The decision to fix or float remains finely balanced. Floating rates remain lower than short-term fixed rates at the moment, but they are likely to rise faster as the RBNZ increases the OCR. Fixing, if even for a short term, has the advantage of greater certainty around cash flows, at a time when floating rates could be rising rapidly. Repaying more than the minimum amount, and spreading the loan over a mix of terms, can also help to reduce the overall risk around uncertain future interest rate changes.

Key Data Previews

Aug 13, Last: 4.2% yr

REINZ house prices

NZ Jul REINZ house price index

ann % chg

ann % chg

 

The housing market remained weak in June with REINZ reporting another sharp drop in house sales and a further lengthening in days to sell through the month. Prices managed to push higher, although didn’t fully reverse the fall in the previous two months.

25

20

Old series New series (stratified) Source: REINZ
Old series
New series (stratified)
Source: REINZ

25

20

15

15

10

10

A housing report from a major Auckland real estate firm suggests that there was some consolidation in the market in July, with sales pushing a little higher and prices ekeing out small gains.

5

5

0

0

Overall, though, there is no getting around the fact that the housing market remains weak. We expect further house price falls over the coming year as upcoming tax changes, rising interest rates, and slowing net migration weigh heavily on housing demand.

-5

-5

-10

-10

Jan-96

Jan-98

Jan-00

Jan-02

Jan-04

Jan-06

Jan-08

Jan-10

NZ Q2 real retail sales

NZ real retail sales

 

Aug 13, Last: 0.2%, WBC f/c: 1.2%

% change

% change

 

On the face of it, consumer spending has been weak through the June quarter. We estimate that retail sales rose 0.2% in the June month, which would put quarterly sales growth at just 0.3%.

10

8

% quarter % annual Source: Statistics NZ, Westpac
% quarter
% annual
Source: Statistics NZ, Westpac

10

8

6

6

4

4

However, the real story is very different from the nominal one. The CPI rose 0.3% in Q1, but within that there were some significant price drops in key retail categories such as food, appliances and fuel. We estimate the retail price deflator fell 0.9%, which would put real retail sales up 1.2% for the quarter.

2

2

0

0

-2

-2

-4

-4

-6

-6

If realised, that would be the biggest increase in sales volumes since March 2007 – an encouraging message after the recent run of soft domestic data, though not one that speaks to the RBNZ of demand-driven inflation pressures.

-8

-8

Jun-95

Jun-98

Jun-01

Jun-04

Jun-07

Jun-10(f)

Aus Jun housing finance Aug 9, Last: 1.9%, WBC f/c: –2.0%, Mkt f/c: –2.0%, Range:

Aus Jun housing finance

Aug 9, Last: 1.9%, WBC f/c: –2.0%, Mkt f/c: –2.0%, Range: –3.0% to 2.0%

Housing finance demand from owner-occupiers weakened for seven consecutive months to April, as policy stimulus was unwound – monetary, as well as grants to FHBs. New lending is down 27% from the peak of last September, with the bulk of the fall from the pull- back in the FHB segment.

After a surprise 1.9% rise in May, a month in which the RBA raised rates, we expect housing finance to owner-occupiers to decline in June – with a forecast fall of 20%. That said, the rate of decline has slowed and with rates now steady, some improvement is likely to emerge over the second half of 2010.

The investor market, by contrast, is in an upswing – a trend that is expected to continue. The value of finance to investors is up 17% on a year ago and up 35% from the start of 2009.

KEY DATA PREVIEWS

Investors up, FHBs down, Upgraders flat

AUDbn/mth value of housing finance AUDbn/mth 12 Sources: ABS, Westpac Economics FHBs 10 upgraders, ex-refinancing
AUDbn/mth
value of housing finance
AUDbn/mth
12
Sources: ABS, Westpac Economics
FHBs
10
upgraders, ex-refinancing
-8%
investor finance
8
+35%
6
4
-57%
2
0
May-00
May-02
May-04
May-06
May-08
May-10

12

10

8

6

4

2

0

Aus Aug Westpac-MI Consumer Sentiment

Aug 11, Last: 113.1

The Westpac-Melbourne Institute Index of Consumer Sentiment surged 11.1% in July, rebounding from a cumulative 12.3% fall over the previous two months and returning to 113.1, a solidly optimistic level although one still well below the exuberant 120ish reads seen late last year and in the first few months of 2010. The bounce in July reflected a combination of the RBA’s decision to leave rates unchanged for a second month in a row, an apparent resolution to the mining tax dispute, more upbeat news on jobs and a recovery in global financial markets.

The August survey is in the field the week ended August 8 – just a couple of weeks ahead of election 2010. Sentiment may be affected by: the surprisingly muted Q2 inflation figures and the RBA’s decision to again leave rates on hold; a continued rally in financial markets (ASX up 4% since the previous survey and the AUD up nearly 4c US); but more mixed data on housing and retail sales.

Consumer Sentiment

index index 130 130 120 120 110 110 100 100 90 90 80 80 70
index
index
130
130
120
120
110
110
100
100
90
90
80
80
70
70
Sources: Westpac Economics, Melbourne Institute
60
60
Jul-90
Jul-94
Jul-98
Jul-02
Jul-06
Jul-10

Aus Jul employment chg

Aug 12, Last: 45.9k, WBC f/c: 10k, Mkt f/c: 20k, Range: flat to 30k

Employment jumped 45.9k in June, with full-time up 18.4k (10th straight rise). But looking through the volatility, trend growth has slowed to 20.4k mth from a Nov-09 peak of 35.8k as spare capacity in the existing workforce is utilised. Average hours worked have been trending up for four months. The softer monthly uptrend in jobs has still seen annual trend growth rise to 2.8% in June (highest since May-07) from 2.6% in May, consistent with leads implying a 3%yr pace in 2010H2.

The recent uptrend in average hours worked still leaves them 1.9% below their mid-08 trend peak, arguing for continued softer monthly trend jobs growth. Our composite of business survey employment indices (LDI) has also fallen since April, with the preliminary July read suggesting 10k/mth growth. Consequently, after the jump in June, we look for a soft 10k jobs gain in July, which would still lift trend growth to 3.0%yr.

Westpac Australian Labour Demand Indicator

index '000 70 50 Sources: ABS, Westpac Economics, AiG, 65 NAB, ACCI 40 60 30
index
'000
70
50
Sources: ABS, Westpac Economics, AiG,
65
NAB, ACCI
40
60
30
55
20
50
10
45
0
40
-10
35
-20
Business survey employt indices fell in July (prelim.)
suggesting soft jobs growth around 10k/mth near term
30
-30
emp
mth chg (rhs, 3m MA)
25
-40
Labour
Demand Indicator (lhs)
20
-50
Jul-80
Jul-85
Jul-90
Jul-95
Jul-00
Jul-05
Jul-10
KEY DATA PREVIEWS Unemployment and participation rates % % 66 12 Sources: ABS, Westpac Economics
KEY DATA PREVIEWS Unemployment and participation rates % % 66 12 Sources: ABS, Westpac Economics
KEY DATA PREVIEWS
Unemployment and participation rates
%
%
66
12
Sources: ABS, Westpac Economics
65
10
64
8
forecasts
63
6
62
participation rate (lhs)
4
61
unemployment rate (rhs)
60
2

Aus Jul unemployment rate

Aug 12, Last: 5.1%, WBC f/c: 5.1%, Mkt f/c: 5.1%, Range: 5.0% to 5.2%

May’s 0.2ppt fall in the unemployment rate encouraged a 0.1ppt rise in the participation rate in June to 65.2%. This drove strong labour force growth of 45.7k, fully offsetting the jobs jump to leave the unemployment rate unchanged at 5.1%. The trend unemployment rate edged down to 5.17% from 5.20% (lowest since Jan-09), in line with our view that ongoing strong labour supply growth will keep the unemployment rate downtrend very gradual.

Months of softer jobs growth around the 10k we f/c for July, following a month of a steady unemployment rate and higher participation rate, have historically seen a partial pullback in participation. We expect a 0.04ppt dip in the July participation rate to 65.1%. This trims labour supply growth in July, offsetting the impact of softer jobs growth to leave the unemployment rate unchanged at 5.1% for the third month.

 

Jul-86

Jul-92

Jul-98

Jul-04

Jul-10(f)

US FOMC decision – nothing to see here folks

Official rates

 

Aug 10, Last: 0-0.25%, WBC f/c: 0-0.25%, Mkt f/c: 0-0.25%

 

%

%

In its latest Beige Book collection of regional economic reports published on July 28, the Fed observed that “a number of [Districts]

8

7

BoC Fed Funds Sources: BoC, Fed, Factset
BoC
Fed Funds
Sources: BoC, Fed, Factset

8

7

noted that the increases were modest, and two

said that the pace

6

6

of economic activity had slowed recently.” July business surveys were mostly weaker and recent housing, retail and industrial data have posted declines ranging from modest to precipitous. Inflation is approaching all time lows.

5

5

4

4

3

3

2

2

For some Fed officials, the slowdown is significant enough to warrant musing about further FOMC stimulus, and there has been some “informed” media speculation that the Fed might signal an intention to restart the bond purchase program (“printing money” in the vernacular). But at this stage we doubt anything new will be forth-coming. The slowdown will be acknowledged, and the commitment to maintain low rates for an extended period will be reiterated.

1

1

0

0

Jul-00

Jul-02

Jul-04

Jul-06

Jul-08

Jul-10

US July CPI: minimal core pressure

Aug 13, CPI headline Last: –0.1%, WBC f/c: 0.2%, Mkt f/c: 0.2% Aug 13, CPI core Last: 0.2%, WBC f/c: flat, Mkt f/c: 0.1%

Despite pressure from some components of the PPI, there has been minimal pass-through to retail prices, as evidenced by regular flat to negative headline/core CPI outcomes this year. Anecdotally, consumer goods firms say they have no pricing power.

In June, the 0.1% CPI fall reflected a 2.9% fall in energy prices and flat food prices, which offset the 0.2% core rate. Before rounding the core rate was 0.159%, so it was not such an upside surprise, despite higher auto and apparel prices and some renewed strength in the medical care component.

In July, gasoline prices will lift the headline but there will be some offset from lower food prices and we expect the core rate to round down to 0.0%.

US CPI inflation

6mth % chg, ann'lsd 6mth % chg, ann'lsd 8 6 4 2 0 -2 CPI
6mth % chg, ann'lsd
6mth % chg, ann'lsd
8
6
4
2
0
-2
CPI
core CPI
-4
Source: Factset
-6
Jun-00
Jun-02
Jun-04
Jun-06
Jun-08
Jun-10

8

6

4

2

0

-2

-4

-6

US July retail sales Aug 13, Last: –0.5%, WBC f/c: 0.5%, Mkt f/c: 0.5% •

US July retail sales

Aug 13, Last: –0.5%, WBC f/c: 0.5%, Mkt f/c: 0.5%

Retail sales fell 0.5% in June due to a 2.3% fall in auto sales. Ex auto sales were down 0.1%, weighed down by lower gasoline prices. Core retailing (ex autos/gas) rose 0.1%, still very soft given the 1.0% slump in May. The housing slowdown was apparent in the detail, with furniture and building materials both showing ongoing declines.

July unit auto sales were up 4% so that could support the retail bottom line but this series has not fitted well with the retail auto component lately. Higher gasoline prices may add a little too. But retailer reports were on balance disappointing, suggesting that core retailing will post another lacklustre outcome.

These pointers suggest that total retail sales will reverse their June fall with a 0.5% rise but we expect ex auto (and core) will be up just 0.2% in July.

KEY DATA PREVIEWS

US retail sales

% ann % mth 10 Source: Factset 8 6 4 2 0 -2 mthly ex-autos
% ann
% mth
10
Source: Factset
8
6
4
2
0
-2
mthly ex-autos *
-4
retail sales *
retail sales ex autos *
-6
-8
* ex gasoline
-10
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10

10

8

6

4

2

0

-2

-4

-6

-8

-10

Key Data and Events CALENDAR Last Market Westpac Comments Median Forecast Mon 9 Aug Aus

Key Data and Events

CALENDAR

Last

Market

Westpac

Comments

Median

Forecast

Mon 9 Aug

Aus

Jun Housing Finance (no.) Jul ANZ Job Ads Jun Current Account ¥bn sa Jul Bank Lending Total %yr Aug Sentix Investor Confidence

1.9%

–2.0%

–2.0%

Owner–occupier finance has weakened, but beginning to stabilise. 11mth uptrend lifted growth to 30.2%yr; implying jobs 3%yr H2 2010. Raw surplus expected to hit ¥1329bn. Goods balance drives widening. Credit demand flaccid. BOJ initiative not falling on fertile ground. Has improved since sovereign debt driven dip to –6.3 in May.

2.7%

Jpn

905

1447

-

–2.0%

-

-

Eur

–1.3

1.6

Tue 10 Aug

 

NZ

Jul Electronic Card Transactions Jul NAB Business Survey Jul NFIB Small Business Optimism Q2 Nonfarm Productivity Q2 Unit Labour Costs Jun Wholesale Inventories Aug IBD/TIPP Economic Optimism FOMC Rate Decision Bank of Japan Policy Decision Jul RICS House Price Balance Jul BRC Retail Monitor Jun Visible Trade Balance £bn Jun DCLG House Prices %yr Jul Housing Starts Jun New Housing Price Index

0.4%

0.0%

Nominal sales growth remains very subdued. Conditions index above trend, but off Dec qtr high. Small business matching July’s big business pessimism in most survey

Aus

8

US

89.0

85.0

2.8%

0.2%

0.0%

Output, hours worked up about the same implying nil productivity growth

–1.3%

1.5%

1.5%

which

in turn means ULC will have risen.

0.5%

0.4%

Clue to direction of revision to Q2 GDP growth. Weekly sentiment figures suggest some risk of further slippage. Fed to acknowledge slowing economy but leave policy as is. No bullets in the holster. Surveyors have been less upbeat about prices recently. Same store sales picked up in May–June (World Cup boost?) Approaching record high monthly deficits again. Lesser watched government measure. Canadian housing market has begun to slow. A June gain would mark a year of renewed price gains.

44.7

44.0

0–0.25% 0–0.25%

0–0.25%

Jpn

0.10%

0.10%

0.10%

UK

9%

5%

1.2%

–8.0

–7.8

11.0%

9.8%

Can

192.8k

184.0

0.3%

0.2%

Wed 11 Aug

 

Aus

Aug Westpac-MI Cons Sentiment Jun Trade Balance $bn Jul Monthly Budget Statement $bn Jun Machinery Orders %yr Jul Corporate Goods Prices %yr Jul Jobless Claims Change Jun International Merch. Trade C$bn

113.1

Jumped 11.1% in Jul to ‘mildly optimistic’ but not ‘wildly optimistic’ levels. Lower oil prices to reduce imports bill. This year’s budget numbers not quite as scary as last year’s. Tends to adjust to big moves like May’s over a number of months. Excess supply of durables and lower input costs across the board. Strong Q2 growth driving joblessness lower. In deficit for three months running.

US

–42.3

–42.3

–42.0

–180.7

–169

Jpn

–9.1%

5.4%

0.5%

0.0%

UK

–21k

–17k

–30k

Can

–0.5

–0.4

Thu 12 Aug

 

NZ

Jul Food Prices Aug WBC-MI Unemployment Expect Aug MI Inflation Expectations Jul Employment chg Jul Unemployment Rate Jul Import Price Index Initial Jobless Claims w/e 14/8 Jun Capacity Utilisation Jun Industrial Production

1.3%

0.7%

Further seasonal increase in fresh food. Still trending up since Feb; but <LR avg implying jobs 3%yr H2 2010. Recent falls stalled uptrend since Jan, but at 3.49% vs 3.16% LR avg. Business surveys imply softer rise; still lifts trend to 3.0%yr from 2.8%. Softer jobs rise offset by 65.1% PR (–0.04) leaving U steady for 3rd mth. Oil prices on the rise again. Back to “clean” reads on claims; new higher trend a sign job mkt slowing. Part of the revised IP report. Should fall in line with prelim output. Orders up four months running, driving production higher.

Aus

–6.9%

3.3%

45.9k

20k

10k

5.1%

5.1%

5.1%

US

–1.3%

0.4%

0.6%

479k

465k

465k

Jpn

0.8%

Eur

1.0%

0.6%

1.0%

Fri 13 Aug

 

NZ

Jul REINZ House Prices %yr Q2 Real Retail Sales Jun Retail Sales Jul CPI Jul CPI Core Jul Advance Retail Sales Jul Retail Sales ex autos Aug Uni of Mich Sentiment Prelim Jun Business Inventories Jun Trade Balance sa €bn Q2 GDP Advance Jun New Motor Vehicle Sales

4.2%

B&T Auckland data suggest some resilience. Sales rose modestly, but with big price drops in some retail items. Core sales up 0.7%, lower fuel prices keeping a lid on total spend. Gasoline up, food down and core prices may round down to flat for the third month in five. Headline retailing to benefit from rise in auto sales and gasoline price but core retail trend remains lacklustre based on retailer reports. Some slippage in weekly confidence data so far this month. More guidance re Q2 GDP revisions. May saw first deficit since Feb last year. Germany rumoured to be up 1+% but other economies slower. StatCan guidance is for a 2% June rise.

0.2%

0.3%

1.2%

0.4%

0.5%

0.2%

US

–0.1%

0.2%

0.2%

0.2%

0.1%

flat

–0.5%

0.5%

0.5%

–0.1%

0.3%

0.2%

67.8

69.4

70.0

0.1%

0.2%

Eur

–3.0

–0.7

0.2%

0.7%

0.6%

Can

0.2%

2.0%

2.0%

New Zealand Economic and Financial Forecasts NEW ZEALAND Economic Growth Forecasts % change   March

New Zealand Economic and Financial Forecasts

NEW ZEALAND

Economic Growth Forecasts % change

 

March years

 

Calendar years

 
 

2010

2011f

2012f

2013f

2009

2010f

2011f

2012f

GDP (Production) ann avg

–0.4

3.5

4.1

3.3

–1.6

2.9

4.4

3.4

Employment

–0.1

1.7

1.5

1.7

–2.4

1.9

1.9

1.6

Unemployment Rate % s.a.

6.0

5.8

5.6

5.1

7.1

6.2

5.6

5.2

CPI

2.0

4.7

2.7

3.2

2.0

4.7

2.4

3.3

Current Account Balance % of GDP

–2.4

–3.3

–4.8

–4.9

–2.9

–3.0

–4.6

–5.0

Financial Forecasts

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Cash

3.25

3.50

3.75

4.25

4.75

5.25

5.75

90 Day bill

3.50

3.70

4.20

4.70

5.20

5.70

6.10

2 Year Swap

4.20

4.40

4.80

5.20

5.60

6.00

6.30

5 Year Swap

4.90

5.00

5.30

5.60

5.90

6.20

6.40

10 Year Bond

5.40

5.50

5.70

5.90

6.00

6.20

6.30

NZD/USD

0.72

0.74

0.76

0.75

0.74

0.73

0.72

NZD/AUD

0.82

0.82

0.83

0.83

0.84

0.84

0.84

NZD/JPY

63.4

67.3

71.4

72.8

74.0

75.2

76.3

NZD/EUR

0.55

0.56

0.57

0.58

0.59

0.59

0.59

NZD/GBP

0.47

0.47

0.48

0.48

0.48

0.47

0.46

TWI

67.5

69.0

70.6

71.1

71.4

71.2

71.1

2 Year Swap and 90 Day Bank Bills 4.70 2 Year Swap (LHS) 4.60 90
2 Year Swap and 90 Day Bank Bills
4.70
2 Year Swap (LHS)
4.60
90 Day Bank Bills (RHS)
4.50
4.40
4.30
4.20
4.10
4.00
3.90
8-Feb-10
9-Mar
7-Apr
6-May
4-Jun
5-Jul
3-Aug

NZ interest rates as at market open on Monday 9 August 2010

NZD/USD and NZD/AUD 3.40 0.74 NZD/USD (LHS) 3.30 0.73 NZD/AUD (RHS) 3.20 0.72 3.10 0.71
NZD/USD and NZD/AUD
3.40
0.74
NZD/USD (LHS)
3.30
0.73
NZD/AUD (RHS)
3.20
0.72
3.10
0.71
3.00
0.70
2.90
0.69
2.80
0.68
2.70
0.67
2.60
0.66
8-Feb-10
9-Mar
7-Apr
6-May
4-Jun
5-Jul
3-Aug

NZ foreign currency midrates as at Monday 9 August 2010

0.83

0.82

0.81

0.80

0.79

0.78

0.77

0.76

Interest

Current

Two Weeks

One Month

Exchange

Current

Two Weeks

One Month

Rates

Ago

Ago

Rates

Ago

Ago

Cash

3.00%

2.75%

2.75%

NZD/USD

0.7336

0.7336

0.7113

30

Days

3.14%

3.02%

2.94%

NZD/EUR

0.5520

0.5647

0.5627

60

Days

3.22%

3.11%

3.02%

NZD/GBP

0.4590

0.4739

0.4719

90

Days

3.30%

3.28%

3.20%

NZD/JPY

62.630

63.740

63.040

2

Year Swap

3.97%

4.23%

4.22%

NZD/AUD

0.7982

0.8139

0.8108

5

Year Swap

4.58%

4.83%

4.88%

TWI

67.360

68.400

67.520

Economic and Financial Forecasts INTERNATIONAL Economic Forecasts (Calendar Years) 2005 2006 2007 2008 2009

Economic and Financial Forecasts

INTERNATIONAL

Economic Forecasts (Calendar Years)

2005

2006

2007

2008

2009

2010f

2011f

Australia

 

Real GDP % yr

 

2.8

2.9

4.0

2.3

1.3

3.3

3.5

CPI inflation % annual

 

2.8

3.3

3.0

3.7

2.1

3.2

3.2

Unemployment %

 

5.1

4.8

4.4

4.3

5.6

5.1

4.8

Current Account % GDP

 

–5.8

–5.3

–6.3

–4.4

–4.1

–2.9

–2.1

United States

 

Real GDP %yr

 

3.1

2.7

2.1

0.0

–2.6

2.6

2.5

Consumer Prices %yr

 

3.4

3.2

2.9

3.8

–0.1

1.1

2.2

Unemployment Rate %

 

5.1

4.6

5.8

5.8

9.3

9.8

10.0

Current Account %GDP

 

–6.1

–6.0

–5.3

–4.7

–2.7

–3.2

–2.7

Japan

 

Real GDP %yr

 

1.9

2.8

2.2

–1.5

–5.8

3.5

1.1

Consumer Prices %yr

 

–0.3

0.2

0.1

1.4

–1.3

–0.7

–0.2

Unemployment Rate %

 

4.4

4.1

3.9

4.0

5.1

5.1

4.8

Current Account %GDP

 

3.6

3.9

4.8

3.3

2.8

3.3

3.4

Euroland

 

Real GDP %yr

 

1.7

3.0

2.8

0.6

–4.1

0.8

1.2

Consumer Prices %yr

 

2.5

2.0

3.1

1.6

0.9

1.0

1.2

Unemployment Rate %

 

8.8

7.9

7.3

7.8

10.0

10.5

10.5

Current Account %GDP

 

–0.2

–0.1

0.1

–1.1

–1.0

–0.5

0.0

United Kingdom

 

Real GDP %yr

 

2.2

2.9

2.6

0.5

–4.9

1.1

1.0

Consumer Prices %yr

 

2.1

3.0

2.1

3.5

2.9

2.5

3.0

Unemployment Rate %

 

2.8

3.0

2.5

3.1

5.0

5.0

5.0

Current Account %GDP

 

–2.6

–3.3

–2.7

–1.6

–2.4

–2.0

–1.5

Forecasts finalised 6 August 2010

 

Interest Rate Forecasts

Latest (Aug 9)

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Australia

 

Cash

4.50

4.50

4.50

4.75

5.00

5.00

90

Day Bill

4.76

4.75

4.75

5.00

5.25

5.50

10

Year Bond

5.15

5.20

5.30

5.30

5.30

5.50

International

 

Fed Funds

0.125

0.125

0.125

0.125

0.125

0.375

US 10 Year Bond

2.82

3.20

3.40

3.50

3.60

3.80

ECB Repo Rate

1.00

1.00

1.00

1.00

1.00

1.00

Exchange Rate Forecasts

Latest (Aug 9)

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

AUD/USD

0.9191

0.88

0.90

0.92

0.90

0.88

USD/JPY

85.38

88

91

94

97

100

EUR/USD

1.3291

1.31

1.33

1.34

1.30

1.26

AUD/NZD

1.2529

1.22

1.22

1.21

1.20

1.19